Asian Markets Tumble

By JEREMIAH MARQUEZ
|  Thursday, May 14, 2009  |  Updated 3:15 AM PDT
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Asian Markets Tumble

AP

Asian stocks reversed course and fell sharply Thursday.

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HONG KONG – Asian stock markets tumbled Thursday as signs of distress among American consumers deflated hopes for a faster end to the global recession.

Every major market in Asia was hit by sharp losses, with Japan and Hong Kong indexes down around 3 percent, as an aggressive nine-week advance started to reverse course.

The gains of 30 percent and more in markets from Asia to the U.S. were driven by a theme of year-end economic revival. Investors had taken heart from less dismal news about the financial sector and industrial production, as well as government stimulus measures and rising liquidity.

But investors found little to pin their hopes on after the U.S. Commerce Department said overnight retail sales unexpectedly dropped in April for the second straight month. Separately, a private-sector report showed a troubling rise in home foreclosures. Together, the reports painted a picture of a U.S. consumer still loath to spend as unemployment increases and the recession drags on.

The news was unsettling because any recovery, particularly in export-reliant Asia, could prove elusive without a rebound in demand from U.S. consumers, whose spending has been a lynchpin of the global economy.

Analysts said the markets had been due for a correction.

"There has been detachment between equity markets and the fundamentals. We were in a period of suspended disbelief," said Kirby Daley, senior strategist at Newedge Group in Hong Kong. "The hype has passed and as reality sets in, there's only one direction that market can take and that's down."

Japan's Nikkei 225 stock average dropped 246.76 points, or 2.6 percent, to 9,093.73, and Hong Kong's Hang Seng lost 517.93 points, or 3 percent, to 16,541.69. South Korea's Kospi shed 2.4 percent to 1,380.95.

Australia's benchmark fell 3.4 percent, Shanghai's index lost 0.9 percent and Taiwan's stock measure shed 1.8 percent. India's Sensex fell 1.2 percent as the country's monthlong election ended.

As if to underscore to fragility of U.S. consumers, Japan's Sony Corp., which depends heavily on overseas markets, reported a 98.9 billion yen ($1 billion) loss for the fiscal year ended March — its first annual net loss in 14 years. The companies shares plummeted 6.8 percent.

Other Japanese exporters didn't fare much better. Toyota Motor lost 4.1 percent, while electronics maker Canon dropped 4.8 percent.

The flood of money into global equities had caused hand-wringing among many market watchers who say stock prices were starting to lose touch with reality.

"We're very skeptical about some of the forward or implied valuations, because they're beginning to make fairly aggressive assumptions about the return to profitability of many companies," said Quentin Fitzsimmons, who helps manage some $8.4 billion of fixed-income funds for London-based Threadneedle. "We wouldn't be surprised to see markets take a breather."

Wall Street was similarly unnerved by the news about U.S. consumers.

The Dow Jones fell 184.22, or 2.2 percent, to 8,284.89. Broader stock indicators sank even more sharply. The Standard & Poor's 500 index fell 24.43, or 2.7 percent, to 883.92.

Wall Street futures pointed to more losses in U.S. markets. Dow futures were down 12 points, or 0.1 percent, at 8,306 and S&P 500 futures dropped 1.2, or 0.1 percent, to 886.50.

The slumping stock market helped pull oil prices even lower despite data showing shrinking crude supplies in the U.S. Benchmark crude for June delivery lost 98 cents to $57.04 a barrel in Asian trade. The contract shed 83 cents overnight.

In currencies, the dollar inched higher to 95.50 yen from 95.36 yen after a steep fall overnight. The euro was slightly higher at $1.3592 from $1.3559.

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